EAT confirms that employers must give notice of dismissal to trigger a statutory trial period

Dentons

For such an apparently simple idea, statutory trial periods are notoriously tricky. Often employers and employees agree some sort of trial period of their own and usually there is no problem. However, if a dispute arises, any deviation from the statutory rules can make a big difference. In this article, we consider the recent Employment Appeal Tribunal (EAT) decision in East London NHS Foundation Trust v O'Connor. In this case, the EAT confirmed that telling an employee his role was being "deleted" did not in itself amount to a redundancy dismissal and, therefore, a statutory trial period was not triggered at that time. The decision was based on the complex legislation on statutory trial periods, which we explore in further detail below.

Legal background

Suitable alternative employment

Under section 138 of the Employment Rights Act 1996 (ERA), an employee will be entitled to an automatic four-week statutory trial period in an alternative position if:

  • they have been dismissed or given notice of dismissal by reason of redundancy;
  • they accept an offer for that alternative employment before their current contract ends;
  • the new contract begins either immediately after the end of the previous contract or within four calendar weeks of the end of the old contract; and
  • the terms of the new contract differ from the original contract.

If an employee unreasonably rejects an offer of suitable alternative employment (or unreasonably resigns or gives notice during a trial period for a suitable alternative), they will lose their right to a statutory redundancy payment. As such, employers may want to ensure that they fall within the statutory trial period scheme where a suitable role is being offered.

Assessing whether or not an employee is entitled to a statutory redundancy payment in this context requires consideration of both suitability and the reasonableness of the refusal:

  • Suitability: This requires an objective assessment of the job offered and the employee in question, to determine whether the job is a suitable alternative for that particular employee. When assessing this, the tribunal will have regard to all the terms of the alternative role (for example, status, place of work, tasks to be performed, pay, benefits, overtime, bonuses, hours/working time arrangements, responsibility, location, flexibility etc.) and how they compare with the terms of the redundant role.
  • Reasonableness of refusal: This will depend, broadly, on the circumstances of the offer and the reasons the particular employee has for rejecting it (including factors relating to personal circumstances, such as health and personal/family commitments). The question is whether, taking all these factors into account, the particular employee in question was being reasonable in turning down the offer. It does not matter whether a hypothetical "reasonable employee" would have accepted.  

The employer has the burden of showing both that: (i) the alternative employment offered was suitable; and (ii) the employee's refusal was unreasonable. This is relevant primarily to the question of whether or not a refusal means that the employee loses their right to a statutory redundancy payment. In practice, tribunals tend to be hesitant to uphold an outcome which would deprive an employee of their redundancy payment. As such, the bar for demonstrating both suitability and unreasonable refusal is fairly high.

Trial period

It does not matter whether or not an alternative role offered is "suitable" (as defined above) or not for the purpose of triggering the statutory rules on trial periods. If alternative employment is offered on different terms, then the statutory four-week trial period is triggered. The test is whether "the capacity and place in which the employee is employed, and the other terms and conditions of his employment, differ (wholly or in part)".  It is worth noting that, for the purpose of this test:

  • all differences count unless they are truly trivial or insignificant;
  • each term is considered individually, and contracts are not considered on the basis of overall effect; and
  • the fact that the new terms may be more favourable is not relevant.

For practical purposes, almost any change at all will trigger the right to a trial period. It is rare for an alternative role to be offered with no changes at all (if there are no changes, the original role is unlikely to be redundant in the first place). Therefore, in the vast majority of cases, a trial period is triggered.
Strictly speaking, the statutory trial period takes effect automatically whether or not it is referred to in the offer letter or contractual terms. Nonetheless, it is good practice to expressly refer to the trial period in the new offer letter and, given the EAT's recent judgment, the benefit of doing so is even more evident. This also allows the employer to confirm that it too can terminate during the trial period. Refusing to agree a trial period can render a redundancy dismissal unfair.

Facts

Mr O'Connor was employed as a psychosocial intervention worker by the East London NHS Foundation Trust (the Trust). Following a restructuring exercise in March 2017, Mr O'Connor was told that his role was at risk of redundancy and was later informed that his role would be deleted with effect from 3 July 2017. Formal notice of dismissal was not given at this stage, although the Trust indicated that formal notice would likely be issued in due course.

Subsequently Mr O'Connor was offered a trial period in the alternative role of care coordinator, commencing on 3 July 2017. The "trial period" was extended until 9 August 2017 to accommodate Mr O'Connor's pre-booked annual leave. At this time, the Trust was unaware that it could not legally extend a statutory trial period. At the end of the trial period, the Trust offered Mr O'Connor the care coordinator role on a permanent basis. However, there was a dispute as to whether the role was in fact suitable alternative employment. If it were, Mr O'Connor would not be entitled to a redundancy payment (see guidance on the meaning of suitable alternative employment above).

Mr O’Connor went off sick and raised a grievance alleging that the care coordinator role was not a suitable alternative role. The Trust agreed to extend the trial period further while the grievance process was ongoing. The grievance was subsequently rejected in November 2017 and the Trust offered Mr O'Connor the care coordinator role again, which he declined.

The Trust terminated Mr O'Connor's employment in December 2017. It declined to make a redundancy payment, asserting that the statutory trial period had ended on 9 August 2017. The Trust's view was that the care coordinator role was suitable alternative employment which had been unreasonably refused by Mr O'Connor and, therefore, he was not entitled to a redundancy payment.

ET decision

Mr O'Connor brought a claim in the Employment Tribunal (ET) for statutory redundancy pay. At a preliminary hearing, the ET determined that the trial period was not a statutory trial period for the purposes of the ERA, and that Mr O'Connor had not been dismissed prior to being offered the care coordinator role on 3 July 2017. On this basis, Mr O'Connor would, therefore, be entitled to statutory redundancy pay following his dismissal in December 2017. The Trust appealed this decision.

EAT decision

The EAT upheld the ET's finding that formal notice of dismissal was not given on or before 3 July 2017, and that the trial of the alternative role that began on that date was not a statutory trial period. The judge commented that there is no rule of law that notification of deletion of a post is sufficient to amount to notice of dismissal in itself. The EAT, therefore, upheld the finding that Mr O'Connor was dismissed in December 2017. Accordingly, the case was remitted to the ET to address the remaining issues that needed to be resolved in order to determine whether Mr O'Connor was entitled to a statutory redundancy payment.

Comment

This case confirms that a statutory trial period in redundancy situations does not arise unless an employer gives specific notice of termination of an employee's current role. Indeed, it can only start after that termination has happened.

Given that the Trust was clear in that Mr O'Connor's role was to be deleted with effect from 3 July 2017, the conclusion that this did not trigger a statutory trial period may come as some surprise. However, the EAT's decision turns on the content of the relevant communications with Mr O'Connor. Specifically, the Trust wrote to Mr O'Connor in June 2017 stating that it was likely that formal notice of dismissal would be issued at a later stage. However, such notice was not in fact given until December 2017. The Trust also wrote to Mr O'Connor in August 2017 suggesting that the terms under the offer for the new role of care coordinator constituted an amendment to his existing contract, thus supporting the contention that there had not been a dismissal.

The extension of the trial period to accommodate pre-booked annual leave and to deal with the ongoing grievance may also have contributed to the EAT’s decision that there was no statutory trial period on the facts.

It is common practice for employers to propose alternative roles during a redundancy consultation process before issuing a formal notice of dismissal and to allow a "trial" in that position before terminating. In such circumstances, the EAT's ruling is a reminder that employers cannot rely on a statutory trial period. We would suggest that employers mitigate this risk by explicitly terminating the existing contract before starting any trial period in a suitable alternative role to avoid any uncertainty. The trial period should then not be extended without recognising that this takes the trial outside the statutory regime and is likely to impact on any right to redundancy pay.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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